Cingular and Verizon Likely Would Face Most Hurdles Buying T-Mobile
Cingular or Verizon Wireless likely would face the toughest fight if they emerged as the purchasers of T- Mobile, regulatory sources said Tues. Other potential players, including rumored suitor Vodafone, or less conventional wireless players like Comcast or even Microsoft, would likely have an easier time winning approval, they said.
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In the latest round of rumors, The Wall St. Journal’s European edition reported that DT’s board has been discussing divesting T-Mobile USA, with a sale likely to bring $25-$30 billion. The conventional wisdom has been for some time that T-Mobile, soon to be a weak 4th among the 4 national carriers, will have to grow or be acquired.
Questions about T-Mobile’s future as a DT subsidiary arose when T-Mobile was relatively inactive in Auction 58, where some predicted it would be a dominant player but instead invested in what was viewed as fill-in spectrum. T-Mobile has only 20-30 MHz of spectrum nationally, though that varies from market to market. Cingular, with the AT&T Wireless acquisition, has closer to 80 MHz across the U.S., sources said. “T-Mobile is, at the end of the day, spectrum starved,” said Jessica Zufolo, analyst with Medley Global Advisors: “They definitely need spectrum to stay competitive in the market.”
Verizon or Cingular would face more questions from federal regulators because of their ties to the Bells and relative strength, said Precursor analyst Rudy Baca: “This raises competitiveness issues that a Vodafone or a Comcast [acquisition] would not raise… Verizon is 2nd, but only just barely, to Cingular. To allow one of those to take out T-Mobile doesn’t fit with the government’s version of where they think competition should go.” Baca said that Cingular or Verizon could probably convince regulators to let them acquire T-Mobile with significant divestitures. “I'm not sure they'd want to,” he said.
Baca said that Vodafone or another foreign competitor would face some scrutiny from Congress and an extra regulatory layer if it were try to buy T-Mobile. “It’s always a complication, but with people like Fritz Hollings no longer on the Hill it becomes less of an issue.”
Regulatory attorneys agreed the Commission likely would prefer to see T-Mobile remain an independent. Former FCC Chmn. Michael Powell, for example, was welcoming of the Sprint-Nextel merger because it created a strong national carrier without Bell ties.
“Cingular and Verizon start with skepticism because of their RBOC ties,” one source said. “The Commission would much prefer this independent thing. Probably Vodafone or a 3rd part would have an easier time.”
But one regulatory attorney said that how the FCC and Justice Dept. defines the communications market is a key question. “When you've got the one or 2 buying someone else there’s always issues, but they're not necessarily insurmountable,” the attorney said. “These days if you're talking about cable guys or telecoms [buying wireless] it depends on how you define the market,” the source said. “Let’s say you're Comcast. How would the Justice Dept. and the FCC look at the market? Is it communications, whether it’s provided by cable or mobile, or it just a mobile market?” The source added: “I would assume they'd look at it as just a wireless market. They may not.”